July 12 (Renewables Now) - Large-scale generation certificates (LGCs) in Australia, one of the main instruments supporting renewables in the country, have an uncertain future as the industry expects the 2020 RET to be met leaving uncertainty about how the future policy framework will evolve.

LGCs are an instrument of Australia's renewable energy target (RET). They are awarded to renewable power producers based on the amount of electricity churned out and then sold or traded, bringing additional revenues. "Liable entities" have to buy certificates under the RET. LGCs spot prices ranged between AUD 76 (USD 56/EUR 48) and AUD 89 in 2017, closing the year at AUD 85.25. However, the Clean Energy Regulator projects that certificate supply in the next decade would materially exceed demand at some stage, as a result of which LGCs spot prices will go down.

Total of 19.1 million LGCs were validated in 2017, and the regulator expects the number to grow to about 24 million in 2018 and roughly 32 to 34 million in 2019.

The large-scale RET for 2020 is 33,000 GWh of renewable power and that level is to remain until 2030. Oversupply is expected at some point in that period.

“The expectation of price declines over time are reinforced by the forward contract price curve and published power purchase agreement prices that remain far lower than the current spot price,” the Clean Energy Regulator said in its 2017 progress report.

Meanwhile, significant discussion is ongoing in Australia regarding a new policy, the National Energy Guarantee (NEG), which is to replace the RET. The plan for a “truly technology-neutral” NEG was announced in October 2017, and in April 2018 the Council of Australian Governments (COAG) Energy Council agreed to move ahead with a detailed design, aiming to have a final NEG version in August.

“Political uncertainty around the replacement of the current clean energy framework is continuing to create challenges for the feasibility and financing of renewable energy projects. We are hopeful that a clear policy resolution will help to support continued growth within the industry,” Shaun Newing, Managing Director at Planum Partners, told Renewables Now.